The discrepancy comes down to changes in spending habits
any measure, American inflation is running hot. On October 13th the Bureau of Labour Statistics reported that the consumer-price index rose in September by 5.4% year-on-year. In August, the Federal Reserve’s preferred gauge, the price index for core personal consumption expenditures, was up by 3.6% from a year before, a 30-year high. But some economists reckon these eye-popping numbers may be exaggerating the true costs being borne by consumers.A daily newsletter with the best of our journalism.
Now the reverse is happening. As America's economy has reopened, prices in spending categories that were hardest hit by the virus such as transport and recreation have surged. But because spending on such things is still well below pre-pandemic levels, consumers are not experiencing the full effects. Mr Cavallo reckons that year-on-year inflation is being overestimated by about 0.5 percentage points.
As long as spending is distorted by covid-19, America’s statisticians may struggle to get their numbers right. This will take time. According to, which tracks behaviour across eight indicators, activity remains more than 25% below pre-pandemic levels. On at least three measures—retail traffic, international and domestic flights and attendance at professional sports events—activity since late July and early August has been moving in the wrong direction.
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